CFO insight and analysis written and compiled by DeloitteCONTENT FROM OUR SPONSORPlease note: The Wall Street Journal News Department was not involved in the creation of the content below.

Text Size

Regular

Medium

Large

Google+

Print

What It Takes to Be a Business Partner: From CFO to CFO

By partnering beyond traditional areas of finance and accounting, CFOs at many organizations are playing a more important role in shaping the strategic direction of their companies. Frank Friedman, CFO and Managing Partner of Finance and Administration for Deloitte LLP, discusses how business partnering has become a priority for the members of his finance team and a critical part in deepening their understanding of the business and becoming business advisors.

Q: In many ways, business partnering requires finance to operate differently, especially within large organizations. Does that require changes within the finance department to make business partnering effective?

Frank Friedman: Yes, you need to have senior level finance people who are also good business advisors so they can bring value to the internal client’s team. The competencies found in the traditional finance function—finance and accounting—may need to be augmented by other competencies, such as strategy, operations, analytics and product development. For the work my finance team does in the area of business planning and analysis (BP&A), I see a growing need for a combination of skill sets that are critical to playing an advisory role. The work entails less pure number-crunching and more analytics, a greater understanding of the business strategy and the metrics to gauge whether the strategy is being executed properly. To be effective in BP&A requires getting in front of issues, not simply reporting on them, and delivering insights.

To be advisors, my team has had to adjust as the business has changed and has had to develop not only new skills but also new metrics and more relevant analysis.

Q: Can you provide examples of how your finance team has taken on a larger business partnering role?

Frank Friedman: Four examples come to mind of how we’re changing at Deloitte and how the finance organization has evolved in response.

One relates to our approach to acquisitions. When acquiring new businesses finance has been part of the up-front team developing strategy, assessing targets and developing the business case—all skill sets that we have had to build and expand. My finance organization also had to develop competencies in due diligence, change management and business integration.

Data analytics is another area where we’ve had to expand our capabilities in finance. With our businesses changing, we need to access data differently than we have in the past. While we still need people who understand accounting, firm systems and controls, they also now have to understand the business they support so they can bring analysis and insights to the table that will help their internal clients.

Another example relates to changes in our organization’s portfolio of offerings, particularly in the consulting arena. These changes have increasingly required competencies in product accounting and analysis, skill sets that we’ve not traditionally needed in the past. So for us it has been important to bring on board people who have hands-on experience with product development, who understand how to measure product success, to factor product costs into their analysis and to determine how long the organization should continue with a product. For us at Deloitte, that’s an example of a competency that we’ve never needed before.

In addition to bringing in new skill sets, we are forming centers of excellence as needed to help address the changing environment. In short, finance continually needs to stay relevant to how the businesses it supports are changing.

Q: How do you determine what finance can contribute to the businesses outside of its traditional responsibilities, what resources are needed to partner more with the businesses, and what are some of the challenges you encounter?

Frank Friedman: Since my position requires me to assess the overall performance of the business and look for improvement opportunities, I work with the business leaders on an ongoing basis to understand what gaps in internal support they have and then work to get those needs filled, be it in the finance, information technology (IT), human resources (HR) or administrative areas. As in most cases, communication with business leaders is critical so that surprises are minimized.

For example, about five years ago we looked at the types of special projects we were doing and where we were getting the experience and skills to support them. At that time, we were using the resources of Deloitte’s consulting arm, Deloitte Consulting LLP, to support a number of these projects, but the learning curve on our finance systems and processes was fairly extensive. Subsequently, we decided to develop an internal strategic analytics team to provide most of this support, subsidized by the consulting group for certain experience that we may not have had in the finance function. We have extended this approach in the past year to include advanced data analytics. Now we have the core skill set within our team and augment that with other resources around the organization as needed.

The challenges are around finding the right resources and determining the right mix of when to keep those in-house within finance or when to source them from one of our businesses.

Q: Are there certain areas of finance, such as forecasting, that are more likely candidates for forging business partnering relationships?

Frank Friedman: Clearly, partnering in areas where business leaders believe the CFO already leads is an easier place to begin. So forecasting, financial reporting and financial analysis are areas in which CFOs can readily start. However, I would argue that what’s critical to finance’s ability to partner effectively with internal customers is developing an overall strategy for how finance should be partnering rather than viewing business partnering as a task-by-task set of projects. The CFO needs to understand what role finance needs to play with the businesses and what finance needs to be to those businesses. Once you determine the breadth of the services you want to provide, then CFOs can hone in on the tactical side. So the focus, at least early on, should be about the strategy of what finance should be providing and what role the finance function wants to play in partnering with the businesses.

CFOs need to define their business partnering strategy: is their strategy to provide the entire gambit of financial services, such as planning, analysis, budgeting, metrics and forecasting, or is the strategy to provide certain types of support and let the businesses provide their own supplement from other resources? In other words, does the CFO want his or her finance team to be the one source of information, or should the businesses have other sources of information? The answer to this question also depends on the competencies that finance and the businesses themselves have within their divisions. To me, setting the strategy of what services finance is to provide and how to provide them is the first step for finance to take toward becoming a business partner.

Q: Are there certain business needs, such as pricing, forecasting or product development, that lend themselves to finance serving as a business partner? Or are there other support areas, such as legal or HR, where finance should be expanding its business partner role?

Frank Friedman: Partnering is a fairly simple concept—working together to bring experience and knowledge from multiple sources to get to a better outcome. Wherever finance can bring experience and knowledge to the table is usually where the function should be serving as a business partner. At Deloitte, my finance team has deep experience in working with our financial systems, analyzing data, developing performance dashboards, creating financing models, etc. So areas such as pricing, forecasting and product development—those that have a significant financial element—make sense for forming a business partnering relationship.

HR is an area where finance can team well. There’s a natural connection point between HR and finance through the use of data. HR is about recruiting and developing talent. Finance has the data that can help support HR in that role, such as what are the characteristics of a person who has the potential to be more successful than one who doesn’t? What are the data-intensive type of analyses that HR and finance can make together to help professionals do their jobs more efficiently?

Another area where finance can team well is in support of the performance improvement actions the businesses are pursuing. Pricing, leverage, staffing mix, margin improvement, cost management efforts, etc., all have a major financial aspect to them where finance can add value.

Q: What role should or does the CEO play in supporting finance to become a business partner and in determining where finance focuses its business partnering efforts? What role does the board play?

Frank Friedman: I think the CEO sets the tone for the role of finance. Is finance considered as just the group that produces the financial and management reports and keeps accounts payable and payroll running, or is finance a business support partner that works with their internal clients to understand and resolve business issues?

In our organization, the CEO expects finance to be that business partner and to initiate strategies that drive teaming and transparency. Concerning our board, business partnering is one of the expectations that the members have of me. It’s a key part of my performance evaluation.

Q: Have there been tangible benefits, or positive outcomes, that have resulted from finance’s partnering relationships with the different businesses?

Frank Friedman: Yes, in many areas. We reacted much faster to the last economic downturn. We also have ramped up our acquisition activities while our firm continues to grow organically in all of our major businesses. I would like to think that finance has played a significant role in working with our businesses to achieve these results. At the same time, these added responsibilities have made my team and myself better at what we do. And they have enabled us to add the right skill sets to our set of competencies and break down some internal barriers.

About Deloitte Insights

Deloitte’s Insights for CFOs provides financial executives a customized resource to help them address the strategic, operational and regulatory issues they face in managing their finance organizations and careers, with top-line digests, research, perspectives and technical analyses.

This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com.